Law Legends


Applicability of GST on Credit Card and Credit Card EMI


The majority of credit card users are familiar with the high annual interest rates associated with revolving credit, such as those found in credit cards, which can reach as high as 42%. Many individuals who are unable to clear their credit card dues within one billing cycle prefer to convert their purchases into EMIs. This allows them to pay a much lower interest rate compared to the revolving credit interest on their spending. But do you know that the total cost of such an option could be 18% higher than the interest rate you expect to pay?

Scope of taxation on interest on credit cards:

Various services and fees charged by financial institutions are subject to the GST, which is passed on to the consumer. While some services or charges may be exempt from GST, many are not.

As per Sl. No. 28 of Notification No. 9/2017- Integrated Tax (Rate) dated 28th June 2017, against heading 9971, GST exemption is applicable to services involving the extension of deposits, loans, or advances, provided that the consideration is in the form of interest or discount, excluding interest associated with credit card services.

In other words, interest on non-credit-card loans is exempt from GST whereas interest charged on credit card loans will not be exempt from GST.

The exemption notification specifically applies to transactions involving the provision of loans, deposits or advances where the consideration is in the form of interest or discount. Therefore, any fees or charges imposed by banks, such as processing fees, late payment charges and statement issuance fees will still be subject to GST.

GST rate on credit card transactions with SAC code

GST on credit cards extends to several facts of credit card services, encompassing interest on credit card EMIs, processing fees, late payment charges, annual fees, over-limit charges and any additional fees or charges levied by your credit card provider.

Below is a table showing the GST charges for credit cards and their respective SAC code

Description of Services


SAC Code Rate (%)
Financial and Related Services 9971 18%

Availability of ITC claims

The provisions of section 17(5) of the CGST Act do not block the availability of ITC on bank charges. This means that you can claim ITC for the GST paid on bank charges without any hindrance.

You need to provide your GST registration number to your credit card issuer so that ITC can be accurately reported in your GSTR-2B.

Insight of High Court Judgment

This point was clarified when the Calcutta High Court in the case of Ramesh Kumar Patodia Vs Citi Bank NA and Ors. took a view that the interest component of EMI of loan advanced by the Bank through a credit card is not covered by the exemption notification and so will attract GST.

The additional cost you incure due to GST depends on the offered interest rate. For example, if you're availing an EMI option at 20% p.a., your additional cost in terms of interest rate will be 18% of 20%, which is 3.6%. Therefore, the effective interest cost, including GST, will be 23.6%.

In this case, the additional charge does not go to the lender but to the government as it is a tax.

Practical Aspect of How you pay 18% more when you convert your credit card spend into EMI

Particulars What Borrower Pays (Rs) What Lender Gets (Rs)
Product Price 100,000 100,000
Tenure 12 months 12 months
Offered Interest Rate 15% 15%
Total Principal Repayment 100,000 100,000
Total Interest Payment 8,310 8,310
Applicable GST Rate 18% 0
Total Tax on Interest 1,496 0
Total Cost Of Finance 9,806* 8,310
Higher Cost (%) 18% NA
Internal Rate of Return (IRR) 17.70% 15%

*Interest + Tax

In the above example with the EMI option at 15% p.a., the additional cost in terms of interest rate will be 18% of 15%, which is 2.7%. Therefore, the effective interest cost, including GST, will be 17.7%. Therefore the additional charges bear by the borrower does not go to the lender but to the government as it is a tax.


Q1. What is IGST in credit card EMI?
Ans. IGST stands for Integrated Goods and Services Tax. It is applicable when a credit card transaction involves the movement of goods or services from one state to another. In the context of credit card EMIs, IGST is charged on the interest component of the EMI.

Q2. What is GST on credit card EMIs?
Ans. GST is applicable on the interest component of the credit card EMI. The current GST rate on financial services is 18%.

Q3. Is GST charged on loan processing fees?
Ans. Yes, GST is charged on loan processing fees. The current GST rate on loan processing fees is 18%.

Q4. How much GST is charged on credit card EMIs?
Ans. GST is charged at the rate of 18% on the interest component of credit card EMIs.

Q5. Can I pay all EMIs of credit card at once?
Ans. Yes, you can choose to pay off all your credit card EMIs at once. However, it's important to note that prepaying your EMIs may attract prepayment charges.

Q6. Can GST be paid by credit card?
Ans. Yes, GST payments can be made using a credit card. You can pay GST through the GST portal using your credit card.

Q7. How is the interest on credit card EMIs calculated?
Ans. Interest on credit card EMIs is calculated on the reducing balance method. The interest is charged on the outstanding balance after deducting the principal amount already paid.

Q8. How to calculate credit card EMI with GST?
Ans. You can use a credit card EMI calculator to determine the monthly EMI amount, including GST. The calculator takes into account the loan amount, tenure, interest rate and GST rate to provide you with the EMI amount.

Q9. What are the GST charges on credit card transactions?
Ans. GST is not directly charged on credit card transactions. However, GST is applicable on interest charges, processing fees, and other charges associated with credit card transactions.

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